Bath & Body Works, Inc. (BBWI): A Bull Case Theory

Core Thesis - Bath & Body Works, Inc. (BBWI) is viewed as an undervalued investment opportunity with potential for growth driven by digital transformation and capital returns [5]. Company Overview - Bath & Body Works, Inc. has a market capitalization of $5.9 billion and an enterprise value of $10.5 billion, specializing in home fragrance and body care products [2]. - The company has a loyalty program with 39 million members, accounting for approximately 10% of the U.S. population, which drives 80% of annual sales, projected to be $7.3 billion in 2025 [2]. Financial Performance - Sales have declined from $7.9 billion in 2022 to $7.3 billion in 2025, negatively impacting investor sentiment and leading to a stock price drop of over 60% since its peak in 2021 [2]. - Management has utilized free cash flow to reduce share count by 25% since 2022 and pay down $1 billion of debt, with a current debt balance of $3.9 billion [3]. Leadership and Strategy - Daniel Heaf was appointed CEO in May 2025, focusing on enhancing digital capabilities and addressing weaknesses in the current platform [3]. - Under Heaf's leadership, the company projects 1–3% sales growth, gross margins of 42.2%, and free cash flow between $750 million and $850 million, alongside $400 million in share repurchases [4]. Investment Potential - BBWI is considered to be trading at 7–8 times forward free cash flow, presenting a compelling entry point for investors if operational improvements and digital transformation are successful [4].